Investment Insights

CIO Viewpoints

What factors can support Asia high yield market performance other than a weakened dollar?

Daily Insights

Focus of the Day
  • DXY rebounded from oversold RSI, but downside pressure persisted

Other Commentaries

  • Trump’s tariff front extended to BRICS anti-US policies; China’s FX reserves rose for 6 months, gold holdings increased; Southbound Bond Connect reportedly to expand to non-banks

Market Analysis

FX Markets Analysis

Latest Technical Highlights

GBP - Uptrend↗

Support / Resistance

vs HKD 10.5966 / 10.9890

vs USD 1.35 / 1.40

British Prime Minister Keir Starmer's office backed finance minister Rachel Reeves, easing concerns over her future. Technically, the resistance level of GBP/USD is 1.4.

Legends

Uptrend ↗  Sideways →  Downtrend ↘

Pertaining to historical trend technical analysis only and do not reflect any forecasts.

Provided by Hang Seng Investment Services Limited

Stock Markets View

  • US equities continue to hit new highs, supported by better-than-expected employment data and the passage of tax reform legislation. However, trade uncertainty persists as US President Trump threatens tariffs  on multiple countries, set to take effect in August
  • While European equities are attractively valued, earnings growth remains sluggish. Uncertainty surrounding US-EU trade negotiations and the nearing end of Europe’s rate-cutting cycle may cap performance
  • Asian equities saw profit-taking after a sharp rally, as the US tariff deadline approaches. Over the medium to long term, favorable economic and policy outlooks across the region, coupled with a weaker USD, are expected to attract capital inflows
  • A softer USD and rebounding commodity prices have driven flows back into EM, with select markets posting strong YTD gains. However, concerns persist over domestic economic weaknesses in certain countries
  • Sentiment remains cautious as markets await further details on Sino-US trade talks, while intensifying e-commerce competition weighs on near-term performance. That said, a structurally weaker USD over the medium to long term is likely to drive capital inflows into HK equities
Legends

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

Bond Markets View

  • The US labor market remains resilient, supporting Fed Chair Powell’s cautious approach to rate cuts. This has driven US Treasury yields to recover slightly from recent lows
  • The Trump administration’s “Big and Beautiful” tax reform, which substantially reduces corporate taxes, is expected to bolster corporate earnings, benefiting issuers
  • China’s policy measures to support consumer-sector financing, coupled with gradual consumption recovery, should strengthen relevant issuers
  • The robust US labor market continues to underpin positive investor sentiment, sustaining demand for high-yield bonds. However, yields on US high-yield bonds have fallen to below 7%, warranting caution
  • Asian high-yield bonds maintain their upward momentum. In China, data indicates rising new residential property prices, and the market anticipates further refinements to housing policies across various government levels, which should help stabilize the property market
  • A weaker USD reduces EM sovereigns’ and corporates’ USD debt servicing costs, but flows remain sensitive to dollar volatility
Legends

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

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